Editorial: Connecticut's Money Is Moving Out

Some of Connecticut's highest earners are leaving the state. How do we get them to stay?

Some of Connecticut's highest earners are leaving the state. How do we get them to stay?

Connecticut's money is moving out — and a lot of it is moving to Florida.

It's common knowledge now that Connecticut is seeing an exodus of residents. But are the rich leaving? According to the latest IRS data, they are.

Legislators who hope to solve the state's budget crisis with ever-higher taxes should pay attention. The data are clear:

Those who moved out of Connecticut from 2015 to 2016 took with them more than $6 billion in adjusted gross income, or AGI. People who moved to Connecticut brought with them only about $3.36 billion in AGI. The total net loss to Connecticut: $2.7 billion. In one year. That was in the top five of all states, regardless of population.

Connecticut realized $6.85 billion in income tax from the 2015 tax year, or 4.3 percent of the $161 billion in AGI reported from all filers. If that same ratio held true in 2016, then the loss of $2.7 billion in AGI would have meant an actual loss of more than $100 million in income tax revenue.

In one year. That doesn't account for all of the problems in a $20 billion budget, but it's a serious dent, and it's indicative of a deep problem: Many of Connecticut's wealthy residents are moving out, and they're taking their money with them.

Legislators, this is strong evidence that taxing residents at high rates is becoming counterproductive.

Here's more evidence:

The average adjusted gross income for all filers who moved out of Connecticut last year was $123,377 — the highest in the nation and far above the state's median income. The average AGI per return for those who moved in was $92,677, or $30,699 less than those who moved out — the biggest difference in the nation. Put another way, those who moved in were not enough in number, or in income, to replace the expats.

The states that poached the most taxpayers from Connecticut were New York (8,202 tax returns) and Florida (7,944). The average adjusted gross income for those who left for New York was $111,653. That's pretty bad, but it's nowhere near as shocking as Florida, where the average return from former Connecticut residents was $253,187 in adjusted gross income.

That means more than $2 billion in income moved from Connecticut to Florida from 2015 to 2016, more than twice as much money as moved to New York.

The overall trend of richer people leaving Connecticut has been increasing over the last five years, according to the IRS data. The total number of tax filers and their average AGI for people who moved out of Connecticut was higher last year than at any time since before 2011-12. For example: From 2012 to 2013, more than 48,000 tax filers had moved out of Connecticut, nearly as many as moved out from 2015 to 2016, but the average return was about $112,000 in AGI, compared to over $123,000 last year.

Goodbye, rich people.

It's not that Florida doesn't have its problems — it does. But it has a unique situation: It can prop up most of its state government on sales tax revenues and attract residents by avoiding an income tax.

Connecticut's financial problems are serious. We have crushing pension obligations, too long ignored. The state must find a way to deal with them without taxing the stuffing out of the rich. That is not a guaranteed way to increase income, as the IRS data show.

The legislature's priority in 2018 must be to tackle this problem that they've hit the snooze button on for decades.